When buying a house, it is essential to consider various factors to ensure that the purchase is financially feasible and sustainable in the long term. The points mentioned are guidelines to help potential buyers determine their affordability and financial stability before making a significant investment.
The property value should not be more than five times your annual salary. This is a general rule of thumb that helps buyers understand how much they can afford to spend on a house. It ensures that the purchase price is within their budget and that they will not face difficulties paying off the loan in the future.
The loan term should not exceed 20 years. This is because a more extended loan term can result in higher interest payments over time, and the borrower may end up paying more than the actual value of the property. A shorter loan term helps borrowers save money in the long run and reduces the financial burden of the loan.
The home loan EMI should not be more than 30% of your monthly income. This is another rule of thumb that helps buyers ensure that their monthly payments are manageable and do not put a strain on their finances. A high EMI can result in financial difficulties and can affect the borrower's ability to pay other bills and expenses.
All your monthly EMIs, including home loans, personal loans, car loans, two-wheeler loans, etc., combined should not cross 50% of your monthly income. This point helps buyers understand the importance of managing their debt-to-income ratio, which is the amount of debt they have compared to their income. A high debt-to-income ratio can result in financial instability and can affect the borrower's ability to pay off their loans.
Finally, for example if your annual salary is 5 lakhs, and you plan to buy a property worth more than 25 lakhs, it is advisable to have another source of income to repay the loan. This is because a high loan amount can result in a higher EMI, which can put a strain on the borrower's finances. Having an additional source of income can help borrowers manage their debt and ensure that they can pay off their loans comfortably.
In conclusion, these points are essential guidelines that potential buyers should consider before buying a house. They help buyers determine their affordability, financial stability, and ability to manage their debt. Buyers should also consider other factors such as location, amenities, and potential resale value before making a final decision.